GLOBAL ECONOMIC PROSPECTS : IS IT RESILIENT ?

 The January 2024 World Bank report on Global Development prospects indicated that after a barrage of persistent shocks during the last four years ranging from COVID-19, Global recession, Supply disruptions due to geo political tensions like Russia Ukraine war, Israel Hamas conflict, high and persistent inflationary tendencies, rising food and energy prices,cost of living crisis climate change crisis,Interest rate hike by Central Banks to the extent of highest level in forty years, and ever mounting public debt of developing countries in general and debt distressed countries in particular.However currently global inflation is being tamed with out triggering a down turn and expects the possibility of a "soft landing"of global economy.The forecasts on Global Economic prospects indicated that both developed and developing countries are set to grow slowly in both 2024 and 2025 than in the decade before COVID-19.In fact global growth which was 6.2% in 2021 decreased to 3.0 in2022, estimated 2.6 in 2023 and forecasted 2.4 in 2024 and a slightly higher level of 2.7 in 2025.For advanced economies estimates showed 5.5 % growth in 2021,2.5 in 2022 , 1.5 in 2023, and forecasted 1.2 in 2024 and 1.6 in 2025.While USA recorded 5.8 in 2021 and 1.9 in 2022 and estimated 2.5 in 2023 in 2024 1.6 and 2025 1.7 were forecasted as against European Union showing 5.9,3.4,0.4,0.7 and 1.6 GDP Growth respectively for the years 2021,2022,2023,2024 and 2025 respectively.Japan is projected to increase below 1% only (0.9%for 2024 and 0.8% for 2025).

 Emerging market and developing economies (EMDEs) recorded 7.0 % growth in 2021 followed by only 3.7 in 2022,estimated to be 4.0 in 2023 and 3.9 and 4.0 forecasted respectively for both 2024 and 2025.China which grew at 8.4% in 2021 declined to 3.0 in 2022 , estimated 5.2 in 2023and forecasted 4.5 and 4.3 for both 2024 and 2025 respectively.Weaker than projected growth in China could lead to deceleration in global economic activities .Further the problems in the real sector, demographic issues adverse climate changes etc have been impacting Chinese economy adversely. On the other hand India performed comparatively better  with 9.1% GDP growth for 2021,7.2 for 2022 ,6.3 for 2023,6.4 for 2024 and 6.5 for 2025.At 6.4 % India remained world's fastest growing and fifth largest economy..According to the report India's strong performance in Financial year 2023-24 is led by robust public investment in growth, tax buoyancy, and vibrant service sector activity thanks to resilient domestic demand for consumer services and exports of  business services even  as merchandise exports slowed reflecting weak external demand.Headline retail inflation remain within monetary authorities target  band of 2-6 percent throughout most of 2023,policy rate being unchanged since February 2023. In any case EMDEs are set to make only limited success in catching up with  advanced economy levels of percapita income, excluding India and China no relative gains are projected between 2019 and 2025.Many vulnerable EMDEs are further lagging behind.EMDEs with weak credit ratings have already seen financial pressures constraining them with  lack of access to international bond market.Weak global growth prospects and various downside risks and major challenges like poverty unemployment and inequality persist in the global scenario.Many EMDES are mainly commodity dependent in terms fiscal  and  import revenues and economic activity.The challenges posed by commodity dependence were visible in recent years because of wide fluctuations in commodity prices partly due to geopolitical tensions. These challenges are likely to aggravate in future when  commodity prices become more volatile during the transition from fossil fuels to more climate friendly energy. 

 Region wise growth prospects showed that East Asia and Pacific region is to slow down from 4.5% in 2024 and to 4.4 %in 2025 as against 5.1% in 2023 largely due to anticipated deceleration in Chinese economy.and protracted real estate issues. Growth in Europe and Central Asia (ECA) is expected to moderate at 2.4% in 2024 and 2.7% in 2025 buttressed by both  domestic demand and and a gradual recovery in Euro area.As far as growth in latin America is concerned it is projected to increase slowly  from 2.3% in 2024 to 2.5%in 2025.The ongoing conflict in the Middle East has heightened uncertainty and geopolitical risks in the Middle East and North Africa (MINA) region. assuming that conflict does not escalate growth in the region is forecasted to reach 3.5% both in 2024 and 2025. Growth in South Asia (SAR) is estimated to lodge marginally lower from 5.7% in 2023 to 5.6 in 2024 and reach 5.9% in 2025 still at faster pace among all EMDEs. India continues to maintain vibrant growth primarily due to robust investments and growth of services sector. Sub-SaharanAfrica is also projected to rebound growth to 3.8% in 2024 and 4%in 2025 where country specific factors including reduced fiscal support and metal exploring economies duly adjusting to lower prices gradually to operate. Similarly in low income countries after declining GDP growth about 3.5% in 2023 GDP is projected to increase 5.5% in both 2024 and 2025.

Coupled with high interest rates persistent inflation,  limping trade and a  diminishing China the global economy might slow down for a third consecutive year in 2024.World Bank president Ajay Banga has been advocating that heavy private sector investments are key  for tackling the challenges before global economy as neither the governments nor multilateral development banks have trillions of dollars in the coffers. The immediate challenge before the world are conflicts in Gaza and Ukraine. In short global growth is set to slow down to 2.4 in 2024 in the midst of lagged and ongoing effects of tight  monetary policy, restrictive financial conditions, declining global trade and investment  conditions. In the context of emerging challenges urgent measures are needed to  tackle existing vulnerabilities including fragile energy and food security ,inclusive growth, and increasing dimensions of climate emergency. Effective  Multilateral cooperation is the prerequisite for the world to come to a common understanding to tackle the interconnected issues. However despite the highly challenging global conditions India has emerged as a significant economic and geopolitical player with projected GDP growth of 6.4 % for 2023-24 and 6.5% for 2024-25 respectively. Global economy is remaining resilient after a stronger than expected growth in 2023 and needed to boost global growth rate above 3% range in the medium term .In nutshell  from the review of Global Economic Prospects 2024 it appears that growth of the global economy is certainly resilient but  at the same time distressingly anaemic.

Comments

menondj said…
That was a wonderful analysis of how the counties including India are growing ! The growth has slowed across the word but glad to know that India is striving to swim across that tide to reach the top!
13 January 2024 at 19:00
Kalyani Nambiar said…
This commentary is a great reminder regarding the link between global challenges and the efforts to build a resilient economic future. However, India's resilience irrespective of the circumstances is commendable !
13 February 2024 at 05:16
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